M/s Navanatha Educational Society vs. The Income Tax Officer

WP/15850/2022HC TelanganaHBHC01021087202219 April 2022Author: SUREPALLI NANDA,UJJAL BHUYAN8 pages
AI SummaryRemanded

What were the facts?

The petitioner, M/s Navanatha Educational Society, an assessee, is challenging an order from the Income Tax Officer (ITO), Ward-1, Nizamabad, dated March 7, 2022. This order directed the petitioner to pay 20% of a disputed demand for Assessment Year 2017-18, pending disposal of their appeal before the National Faceless Appeal Centre (NFAC). The petitioner had filed an appeal against an assessment order passed by the ITO under Section 144 of the Income Tax Act, 1961, on December 17, 2019. During the pendency of this appeal, the petitioner filed a stay petition on February 4, 2022. The ITO's impugned communication, which granted stay subject to the 20% deposit, was based on a direction from the Principal Commissioner of Income Tax-2, Hyderabad, citing a CBDT circular. The petitioner also challenged a notice under Section 226(3) of the Income Tax Act, 1961, dated November 23, 2021, issued to their bankers.

What did the High Court hold?

The High Court held that the Income Tax Officer, while dealing with a stay petition under Section 220(6) of the Income Tax Act, 1961, acts as a quasi-judicial authority and is expected to apply its own mind and pass a reasoned order. The impugned intimation was found to be devoid of reasons, merely stating that the Principal Commissioner had informed about a CBDT circular. Citing the Supreme Court's decision in Principal Commissioner of Income Tax v. L.G. Electronics India Pvt Ltd., the Court clarified that administrative circulars do not fetter quasi-judicial authorities and that authorities can grant stay orders with lesser deposit amounts based on individual case facts. Consequently, the impugned intimation was set aside and quashed. The matter was remanded back to the Income Tax Officer for a fresh decision on the stay petition, in accordance with law and after hearing the petitioner, within thirty days. During this period, no coercive steps were to be taken against the petitioner. The attachment of bank accounts was made subject to the fresh order to be passed by the ITO.

What were the issues?

1. Whether the order of the Income Tax Officer directing the petitioner to pay 20% of the disputed demand pending appeal is arbitrary, illegal, and violative of principles of natural justice, particularly in light of the Supreme Court's ruling in Principal Commissioner of Income Tax v. L.G. Electronics India Pvt Ltd. Assessee's Contention: The petitioner argued that the order was arbitrary, illegal, bad in law, bereft of reasons, and violative of principles of natural justice. They relied on the Supreme Court's decision in Principal Commissioner of Income Tax v. L.G. Electronics India Pvt Ltd., asserting that administrative circulars do not fetter quasi-judicial authorities and that authorities can grant stay with lesser conditions based on individual case facts. Revenue's Contention: The revenue contended that the order was passed as per a CBDT circular, which stipulated a 20% payment for stay of demand. They did not explicitly argue against the petitioner's reliance on the L.G. Electronics case or present counter-arguments on the arbitrariness or lack of reasons.

Which sections of the Income-tax Act were involved?

Section 144,Section 220(6),Section 226(3)

AI-generated summary — verify with the full judgment below

HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD (Special Original Juri iction) TUE AY ,THE NINETEENTH DAY OF APRIL TWO THOUSAND AND TWENTY TWO PRESENT THE HONOURABLE SRI JUSTICE UJJAL BHUYAN THE HONOURABLE MRS JUSTICE SUREPALLI NANDA WRlT PETITION NO: 15850 OF 2022 Between: AND M/s Navanatha Educational Society, C/o Narendra Degree College, Survey No.. 21 , 46311 , 46312, Perkit, Armoor, Nizamabad District - 503 224' Telangana. Represented by its Secretary cum Correspondent, Mr. Dasari Shankar, S/o lMr. D.Rajaram. ...PETITIONER

1.

The lncome Tax Officer, Ward - 1, Nizamabad, lncome Tax Office, 6-2-15613' Subhash Nagar, Nizamabad - 503 002, Telangana

2.

The Principal Commissioner of lncome Tax - 2, Hyderabad' Signature Towers, Sy. No.. 6(P) of Kondapur, Sy. No". 37(P) of Kothaguda, Opposite Botanicbl Gardens, Serilingampally M-andal, Ranga Reddy District, Hyderabad - 500 084, Telangana

3.

The National Faceless Appeal Centre (NFAC), Delhi, lncome Tax Department, Ministry of Finance, Government of lndia

4.

The State Bank of lndia, Main Branch, Armoor, Nizamabad District - 503 224 ...RESPONDENTS Petition under Article 226 of lhe Constitution of lndia praying that in the circumstan

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